Daimler-Benz deliberates downsizing DASA as part of an evolving strategy to confront its dollar difficulties

FRANKFURT--After a costly phase of hell-bent expansion in becoming the largest aerospace company in Europe, Daimler-Benz AG is about to put the organization on a reduction diet aimed at bringing it back down to earth in the face of severe dollar-related losses.

Ever since he learned last year that he would succeed Edzard Reuter this past May as head of Germany's mightiest industrial empire, Jurgen Schrempp has pushed the pace of restructuring throughout the whole group. But more is to come. Much more.

A searching Schrempp review is under way of costs at Daimler's nonautomotive operations-profitable Mercedes-Benz represents two-thirds of Daimler's total business. Heavily loss-making Daimler-Benz Aerospace (DASA), which accounts for 16% of Daimler's activity and has already reduced its work force by 20% and shut down six plants in Germany, is a prime target. Also hurting badly is electronics giant AEG, which books 10% of overall revenues.

Schrempp's recently installed successor as DASA chairman/CEO, mustached Manfred Bischoff, will have to deal with what promise to be sobering consequences. Aerospace managers elsewhere in Europe believe the former DASA finance chief won't shrink from making difficult decisions: "He's a very, hard commercial businessman in an industry which has not had a history of clear-thinking commercial judgment," declared one executive.

DASA's immediate fate hinges on a belt-tightening study nicknamed Dolores, short for "dollar-low rescue," because Daimler, as do many other German companies, blames its fiscal plight largely on effects of the strong deutsche mark. The Dolores working group submitted its preliminary. draft to the DASA supervisory board on July 18. In a nutshell, it aims at achieving profitability on the basis of the U.S. dollar at Dm1.35. Earlier miscalculations valued the dollar at Dm1.60 for 1995; the current fluctuating rate is in the neighborhood of 1.38-1.41.

"Dolores" also happens to stem from the Latin word for pain and suffering, signaling the likely effect of the study on DASA as the concern comes to grips with the costly legacy of what analysts regard as ill-judged diversification. …

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